Part One: The New Business Model For Residential Construction In Massachusetts

Based on our extensive interviews, we have identified the emergence of a new and fully institutionalized business model operating in residential construction across the Commonwealth. Practices such as the illegal misclassification of workers, wage theft, and paying workers in cash, once at the margins of the construction industry, are now at the center of medium and large-scale residential construction in Massachusetts. From our interviews we have identified four dimensions of this new business model in residential construction.

The first dimension involves an almost complete jettisoning of regularized employees in residential construction. While some contractors maintain a small number of direct employees, using workers who are not direct employees saves employers approximately 30% of labor costs by not having to pay federal and state tax, Social Security, unemployment insurance contributions, and a number of associated costs. But upon closer inspection, the vast majority of these workers in construction, under current law in the Commonwealth, should be classified as employees. The lack of regular employment in legitimate firms creates the conditions for the hyper-exploitation of these precarious and mostly undocumented workers.

This reliance on illegally misclassified workers has been greatly facilitated by the emergence of a new labor intermediary: labor brokers, the second dimension of this new business model. These brokers now supply the vast majority of largely undocumented workers who fill the jobs in residential construction. Without corporate identities, they are not accountable and operate largely in the shadows. Their activities are nearly untraceable in that they pay their workers in cash, a fundamental cornerstone of this new business model. This cash-only world is a hothouse for wage theft, which we have identified as a central feature of this business model. Labor brokers routinely sign contracts with general contractors or subcontractors that they know are impossible to fulfill without stealing the wages from workers they have brought to the job—something they do regularly.

Third, our research also found that workers in residential construction are pushed to work incredibly hard in precarious working conditions, are not covered by workers’ compensation, any company-based healthcare or disability program. We have documented how hanging drywall—already a dangerous occupation—has become intensely unsafe because of the primitive working conditions under which most misclassified workers toil. Workers are encouraged not to report accidents and, if they are seriously injured, employers are rarely held financially responsible; their medical costs end up being paid for by the Commonwealth and its taxpayers.

Finally, none of these practices are restricted to the margins of the residential construction industry where they began. Indeed, many major developers and general contractors alike are fully aware of these illegal, unethical, and predatory practices in the construction process, yet choose to condone them anyway. They too sign contracts with subcontractors and/or labor brokers knowing full well that they can only be fulfilled if workers are illegally misclassified and hyper-exploited to work in unsafe conditions, and when wages are regularly stolen from them. We look more carefully at these four dimensions below.